I'm at the points now where my debts (credit cards, bills, etc) are becoming a lot more managible and my bank is starting to grow, so I'm looking into getting my money to work for me

I admit, I know absolutely NOTHING about it, and while I'm gonna start reading up on it for myself, anyone else experienced in the subject or trying to get into it themselves as well got any tips?

Thanks in advance

1/6/2008 2:31:45 PM

I'd get in to that right after I took care of any IRA or 401k options I had.

1/6/2008 2:33:24 PM

http://www.thewolfweb.com/message_topic.aspx?topic=508055

the guys that post in there are generally pretty helpful to newbies

1/6/2008 2:34:26 PM

^^ yea, as soon as my benefits were eligible i got my 401k shit right

^ thx, ill give it a read

[Edited on January 6, 2008 at 4:12 PM. Reason : .]

1/6/2008 4:12:06 PM

i may have some bus 225 dvd's i burned...i can check...its personal finance...talks about 401k's and stock markets and mutual funds and all that ish

imo, mutual funds seemed like the best idea...dont fuck with commodities like gold...oh and when you buy a house put as little down as possible

1/6/2008 4:14:41 PM

now is not the time for stock market from what ive been reading,
in the next few years there could be 1929 like stock market crash

if i were you i'd change my money into chinese yen and sit on it


^why put little down?

[Edited on January 6, 2008 at 4:17 PM. Reason : .]

1/6/2008 4:16:56 PM

ok for sake of easy math: 2 situations

100k house, 25k down

or

100k house, 5k down

lets say average rate of return on house is like 7 percent

so after the first year, you have a house worth 107k, that you put 5k down on

or you have a house thats worth 107k, that you put 25k down on

so in first situation you turned 5k into 107k

in other situation you turn 25k into 107k

which one do you think sounds better?

that 20k you saved could be put in stock market and shit

that is basically verbatim of John Huggard, bus 225 professor

oh and do 30 year mortgages...pretty sure huggard says 30 year mortgages are better than 15 year...pretty sure he specifically says "if they do over 30 years, get that, but most do 30 years"

1/6/2008 4:23:31 PM

what about the interest rate, if you do 30 years you'll end up paying like $150K interest on $100K house

i dont know, its pretty complicated

1/6/2008 6:29:39 PM

The interest rate on mortgages is very low compared to the interest you can earn in the stock market.

Also the interest on a house is tax deductible.

You're always better off paying off your home as slowly as possible because you are able to borrow money cheaply.

Ideally, you'd like to put no money down on the house but that triggers a higher interest rate or PMI so generally speaking the 20% down payment with a 30 year fixed rate is your best option.

There are potential scenarios where there are better options available for your unique situation though.

1/6/2008 6:35:28 PM

Quote :

"what about the interest rate, if you do 30 years you'll end up paying like $150K interest on $100K house"

This is where the concept of the time value of money comes into play. In 30 years, that 150k will only really be like 50-75k(based on inflation) in today's money. It is complicated, but it is possible(and with most houses, I think its fairly probable) that by keeping the 20k you can invest it with a good enough return to actually come out with more money.

This is also why some people will argue that you shouldn't pay off the principle on your mortgage. You're coughing up cash that you could be investing elsewhere.

Quote :

"Ideally, you'd like to put no money down on the house but that triggers a higher interest rate or PMI so generally speaking the 20% down payment with a 30 year fixed rate is your best option."

And this is a really good point. You can only go so low before you start throwing away money on a higher interest rate/mortgage insurance, etc.

[Edited on January 6, 2008 at 6:54 PM. Reason : .]

1/6/2008 6:52:35 PM

J_Hova:

1. read up on http://www.fool.com

2. check in the threads here in the Lounge--there is an '07 thread that's about fortyeleven pages long, and a brand new '08 thread.

However, you do not want to start trading individual stocks at this stage in the game.


what you want to do is open an account with a discount brokerage (a lot of us, including myself, use Scottrade). You want to start an IRA (probably a Roth-type, if you foresee yourself being in a higher tax bracket in retirement than you are right now and in the near future, which will be the case if you make financially responsible decisions.)

After that, you decide what to put in the account. Probably the simplest approach is to go with a targeted retirement mutual fund from a company like Vanguard, Fidelity, or T. Rowe Price (I haven't looked much at these lately, because they're not really my style personally, but if I remember correctly, the T. Rowe Price product looked the most attractive to me). Basically, you figure out when you plan on retiring, and the fund becomes progressively more conservative as you approach that date.

Another option is to go with a mix of index funds (a special class of mutual funds charge very, very low fees yet offer generally the same performance). The backbone of such a portfolio will generally be an S&P 500 index. You may want to add a small (5-20% component, with something in the middle of that range probably being best) component of an emerging market index. Round it out with other indices you prefer, such as international indices and/or large, mid, or small-cap indices, etc.

You will be able to fund an IRA at the rate of $5000/year, which will likely increase over time. You should strive to max that amount out (monthly installments are fine) every year. Whenever you get your financial house in order to the point that you can invest more than this, it may be time to open a second brokerage account and start buying individual stocks or other investment vehicles.

Another very high priority is to start generating an emergency fund to the tune of at least a couple month's worth of expenses (to include debt payments, etc). I would do this with a money market account (functions basically just like a savings acct--I can even write checks from mine if I wanted to--but it will yield 4-5%).




None of this is rocket surgery at all. I promise. Part of the battle is gaining a working knowledge, which can be done pretty easily just by reading sites like http://www.fool.com, magazines such as Money or Kiplinger's, and even threads on here (using caution to sort out disinformation, of course). You don't need to be a Wall Street analyst to get rich at this. What you do need is discipline to be financially responsible, as it's easy to finance a lifestyle above your means, and it's easy to slack on your saving/investing.

I would say that 15% of your gross income is a good ballpark figure that you should be saving/investing, and I would treat it just like a BILL. Have it automatically drafted from your bank account into your IRA/other brokerage acct/savings acct every payday or once per month

1/6/2008 7:21:59 PM

oh yeah...to add to the last thing duke said

everytime you get paid, devote 15 percent of your check to savings or like money market accounts etc...thats something else huggard said...like second class he is like if you cant save 15 percent of every paycheck, then you either need another job, or need to rethink your life(something of that effect)

1/6/2008 7:51:02 PM

my little bit of stock advice....don't put an unreasonable sized chunk of money into the stock of the company you work for JUST because you work there.

I don't know how many times I've heard about people screwing themselves over like this (Nortel comes up a lot around here).

1/6/2008 8:38:03 PM

^^ exactly, except that you shouldn't be limiting yourself to the low returns of savings accts and money markets, especially at our age.

1/6/2008 10:54:28 PM